There isn’t a dedicated thread for this yet, even though several on the forum likely own or follow it.
This is a Gaming/media sector company listed on the Stockholm stock exchange, which operates quite globally. The company has made several acquisitions recently.
This year, the company has performed better than the average Swedish gaming sector listed companies (both in business operations and share price). Strong revenue growth (+93% during H1) and adj. EBIT profitability (18.7% during H1).
The Q3 report will be released tomorrow, 15.11, as they brought it forward by a couple of weeks.
Adding interest to the upcoming earnings report is the fact that they published a very positively-toned announcement at the end of October, which, judging by its title, can be interpreted as a verbal “positive earnings surprise” if one wishes, even though nothing more concrete was stated:
We deem the report as strong. Revenue was 3% above our estimates, while Adj. EBITDA was 12% ahead. The beat was primarily driven by the Media segment, which showed stellar scalability.
On current estimates. MGI trades at 2022’E EV/Adj EBITDA ~8.5x and EV/Adj EBIT ~10.8x. We believe the company is undervalued based on its strong growth trajectory and exposure to the fast-growing Ad-Tech market. On a relative basis, MGI’s Media business trades at a clear discount compared to US-listed Ad-Tech peers.
The company left its guidance unchanged. Based on the report, we expect to do minor revisions and will keep our valuation range. (Base 85, Bull 110)
Target prices are rising above 8e (80sek) across the board, but the share price keeps falling after a good earnings report .
Apparently, the market is completely focused again on some small detail, which, in the case of this stock, is probably Malta and moving away from there/tax implications…sometimes over a year from now.
In fact, target prices have not yet risen; the first four analysts have kept their target price (TP) and buy recommendation unchanged. Details on previous target prices can be found via the link in the previous message. Let’s see if there will be new upward revisions after the analyst call that just ended.
Today, institutions like MS and BofA have dumped ~300,000 shares. One might imagine an upward trend towards the end of the week.
The Marketscreener forecasts below are likely outdated, Red Eye’s comments are further down
[
Based on Marketscreener forecasts, it seems like a very affordably priced company (even though the Twitter thread comments claim otherwise)
2022 forecasts net sales: 2231m SEK and net income 270m SEK.
So P/S 1 and P/E 8.5 (if net income is the correct metric since EBIT is reportedly not)
]
In other quarters, growth has also been over 100%, I haven’t had time to do a more detailed study yet.
And it looks like it’s going straight to my watchlist too . Is there also some hidden bomb here, like with Kindred, or is the stock valuation just unbelievably low? Doubts about profitability? As seems to be the case with all other gaming companies right now.
Edit: Interestingly, Red Eye’s Base price is exceptionally close to the Bear-case here . High risk, high reward?
What does the “Strategic minority ownership” mentioned in the M8G press release mean . Are they collaborating on something?
Edit3. In brief: The Twitter thread revealed some thoughts behind the acquisition: M8G’s media side could benefit Enad7’s gaming operations + M8G’s gaming expertise, benefiting both.
An interesting move by Remco. Many investors will probably see this as an increase in risks, but there are also opportunities here. MGI is unlikely to remain merely a minority owner; at least, the goal would presumably be to buy out the entire operation. We’ve been expecting acquisitions on the gaming side since summer, which haven’t materialized yet, so cash is now being funneled into this. EG7’s portfolio includes games, and combining these with MGI’s media side would certainly bring those much-touted synergies.
This doesn’t seem to have been posted here yet. Pareto has also raised its target price and forecasts.
"3.12.2021 at 11:47 · Finwire Smallcap
Media and Games Invest’s 2021 Guidance Too Conservative According to Pareto - Raises Target Price
Gaming and media company Media and Games Invest (MGI) reported yet another record quarter in Q3 thanks to strong catalog sales and better-than-expected performance in the media segment. This is according to Pareto Securities, which believes the company’s full-year forecast is conservative.
The analytical firm raises its adjusted EBIT estimates for 2021-2023 due to the better-than-expected margin profile in the media segment.
Pareto reiterates buy and raises its target price to SEK 82 (80)."
On the Swedish side, there is active discussion, amazement at the share price level, and some decent technical observations. The Fib 0.5 level would be around 39.5 SEK and the weekly EMA50 at 41.8 SEK, and I don’t really believe that fundamentals would push it down to around 30 SEK. In that case, a rapidly growing (Q3 41% organic, 80% total) and profitable company would be valued at around 10x EV / adj. EBIT, based on 2021 actuals. Currently, one has to pay 12x adj. EBIT, which will drop significantly below 10x when looking at next year’s forecasts (or even the current organic growth rate). This really prices in a pretty steep decline for the entire gaming industry. Or perhaps people are just cashing in profits - after all, the stock is still up +92% YTD.
“We believe the rationale behind the purchase is to gain access to Daybreak, which is one of the leading MMORPG developers and publishers. Daybreak is also active in the F2P and game-as-a-service market. Its Game portfolio is well-diversified and consists of original IPs and iconic third-party IPs, such as Everquest, Planetside, Lord of the Rings, and DC. The games are mainly monetized via in-game purchases, membership subscriptions, and further DLC/expansion packs. A high retention rate characterizes the game portfolio. 65%+ of bookings for each game stems from players who have been playing for more than three years.”
“Even though Daybreak is a good strategic fit for MGI’s game segment, we would rather see further investments or acquisitions in other verticals. However, we believe the recent share price weakness, roughly down 18% since the press release is an overreaction.”
Could it also be a bit like, “And no one else will buy this out from under our noses at these prices”?
Also, a speculative comment picked from the Avanza forum about the reasons for the investment: (translation slightly stiff)
MGI cannot be called expensive with these Red Eye valuations. The current share price of SEK 41.80 is 7% below their bear case. Base SEK 85.0 and Bull SEK 110.
Remco (CEO) continued his purchases before Christmas and now between holidays. Total December purchases 308,669 euros / SEK 3.08 million. Total 2021 purchases now over one million euros, SEK 10.1 million.
December 29: 16,000 shares for 67,073 euros
December 28: 19,000 shares for 80,796 euros
December 27: Remco bought shares for 42,683 euros.
December 23: 3,000 for 4.29 euros each, a deal of 12,870 euros.
.
. Is there also some hidden bomb here, like with Kindred, or is the stock valuation just unbelievably low? Doubts about profitability? As seems to be the case with all other gaming companies right now.
